U.S. stocks gain for third straight quarter

KateGibson

NEW YORK (MarketWatch) — U.S. stocks dropped on Monday, taking a little shine off the third straight quarter of gains, as investors worried about a standoff on Capitol Hill and the likely duration of a possible government shutdown.

“This is not a doomsday situation; at some point someone will blink and there will be an agreement. I’m not optimistic we’re going to avert a shutdown, but I don’t think it’ll last more than a few days,” said Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management.

“I don’t see a tremendous amount of panic in the markets, and that to me is a hopeful sign that markets sense an agreement, and maybe an agreement that’’s positive,” Heckman added.

Lawmakers have until midnight to pass an emergency measure to keep the federal government running starting Tuesday, the beginning of the 2014 fiscal year. If an accord is not reached, hundreds of thousands of government workers could find themselves on unpaid leave.

The vote on Capitol Hill follows a weekend that offered no indications of progress between Republicans and Democrats, with Republicans in the House looking to stall President Barack Obama’s Affordable Care Act for a year, in addition to other changes to the law. Democrats have said they would not allow that scenario to play out. Read: Five market lessons from past government crises.

Reuters

President Barack Obama

“Will the voices of government workers not getting paychecks and others in the private economy affected by a government shutdown be loud enough for a certain group of House Republicans to get off their ‘principles’ and do the right thing for the country? If not, then maybe they need to see more than a 175-point drop in the Dow Jones Industrial Average to get their attention,” noted Elliot Spar, market strategist at Stifel Nicolaus & Co., in afternoon emailed commentary.

After a 191-point decline, the Dow Jones Industrial Average
DJIA, -0.32%
finished at 15,129.67, down 128.57 points, or 0.8%. The blue-chip index climbed 2.2% in September and 1.5% for the quarter.

The S&P 500 index
SPX, -0.23%
lost 10.2 points, or 0.6%, to 1,681.55, with consumer staples and energy the leading laggards among its 10 major industry groups, all of which fell. The index rose 3% in September and 4.7% for the quarter.

The Nasdaq Composite
COMP, -0.01%
declined 10.12 points, or 0.3%, to 3,771.48, rising 5.1% for the month and nearly 11% for the quarter.

Government shutdown: Winners and losers

(4:29)

Brookings Institution Senior Fellow Elaine Kamarck, a former Clinton administration staffer, explains what it was like in the White House during the last government shutdown in 1995. (Photo: Getty)

For every two shares rising, roughly three fell on the New York Stock Exchange, where 878 million shares traded. Composite volume approached 3.3 billion.

“It’s difficult to say what these politicians will eventually put together, but the largest problem the market faces here is not per se the budget controversy, or the debt ceiling, or even quarterly earnings, it’s complacency, which is unsettling because it opens the possibility of a larger decline on any negative news,” said Bruce Bittles, chief investment strategist at RW Baird & Co.

The market’s significant climb during the past 18 months has much to do with “zero-percent interest rates and quantitative easing,” said Bittles of the Federal Reserve’s monetary policy, which includes the central bank purchasing $85 billion a month in bonds. The Fed’s monetary easing both encourages investors to buy stocks and discourages investors from selling equities, said Bittles, given the policy has reduced interest rates and returns on government bonds.

The price of oil and gold fell, with oil
US:CLX3
off 54 cents, or 0.5%, at $102.33 a barrel, leaving the most-active contract off 4.9% for the month but up 6% for the quarter. December gold
US:GCZ3
fell $12.20, or 0.9%, to $1,327 an ounce, leaving the precious metal up 8.4% from the end of June.

Treasury prices were mostly higher, with the yield on the 10-year note
US:10_YEAR
used in figuring mortgages and other consumer loans down 1 basis point at 2.615%. The 10-year note closed 13 basis points higher on the quarter.

The U.S. Labor Department said it would not release the nonfarm-payrolls report this week should the government shut down, but Bittles views the September report as likely to be a nonevent, given the budget battle and the looming partisan dispute over the nation’s debt ceiling.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.